The City gave Aviva’s rescue plan an emphatic thumbs-up today, with the shares rising almost 10 per cent to a five-year high as the insurance giant reported a £2.2 billion profit.
A year after it made a £2.9 billion loss, cut its dividend and scrapped bonuses for senior directors, analysts claimed it was finally turning a corner.
Aviva shares soared 43p to 505p as the company raised its final dividend 4 per cent to 9.4p and revealed that it had paid off £1.7 billion of its internal debt, which chief executive Mark Wilson (pictured) described as being the “single biggest overhang on our stock”.
Despite the strong showing, he promised to “guard against complacency” over the next few months and confirmed that directors would receive a bonus this year. However, he would not disclose how much.
"Aviva still has issues to address," he said. "Have we made progress? Yes, some. Is it a little faster than anticipated? Probably. Have we unlocked the full potential at Aviva? Not yet."
The company ran into difficulties under former chief executive Andrew Moss, who was ousted from his role in 2012 following a shareholder revolt at that year’s annual general meeting.
At the time, investors claimed the group had become bloated and inefficient. Wilson and his chairman, John McFarlane, have since overhauled its global structure, offloading underperforming businesses in areas such as the US and entering new territories like Indonesia.
The management team has also been changed and more measures are expected over the next 12 months, including a possible exit from India.
Aviva increased the value of its new business by 13 per cent to £835 million and said cash flows from its numerous divisions to group level were also up 40 per cent to £1.26 billion.
Its overall combined ratio in 2013 came in at 97.3 per cent, in effect meaning that it took in more in premiums than it paid out in claims.
In the UK, the insurer said that the wet winter weather in January and February was likely to cost it about £60 million.
Wilson added: "Following our exit from a number of low margin, underperforming or non-strategic businesses, Aviva is simpler, more focused and better managed. We have significantly improved our capital surplus, increased our liquidity and have a stronger leadership team."
The results come a week after rival RSA was forced to launch a £775 million rights issue under its new boss Stephen Hester to boost its capital.
Aviva also revealed that improper trades in fixed income by former traders had cost it £132 million last year.